Surprise! Motorists Buying Less Gasoline

While the laws of supply and demand seem to have been removed from oil and gasoline prices, another economic law is fully in effect; if you make something expensive enough, consumers will buy less of it.

MasterCard SpendingPulse reports rising gasoline prices, which are over $4 a gallon in some parts of the country, have become a concern with consumers to the point that they are purchasing less of the fuel.

Consolidating trips

"Based on what we've observed in the last three to four years, high gasoline prices typically result in consumers consolidating shopping trips, shopping closer to home, and making fewer trips to the brick and mortar locations as we get to Saturday,” said Michael McNamara, Vice President, Research and Analysis for MasterCard Advisors SpendingPulse. “On the other hand, we've seen the e-Commerce channel benefitting somewhat from this trend."

In the same report, McNamera reported that most retail sectors continued to record solid growth year-over-year, similar to February, although there wasn’t an acceleration of momentum from February to March. Could that be because consumers were spend more of their disposable income to keep their cars running?

The average price of self-serve regular gas today is $3.77 a gallon, according to AAA. That’s just about 90 cents a gallon more than consumers paid at this time last year.

Supply and demand

Has supply and demand changed radically in that time? Not really. The economy is showing encouraging signs of life here and there, but unemployment remains stubbornly high and home prices keep falling.

Meanwhile, we are swimming in crude oil and gasoline. In its last report, the U.S. Energy Information Administration reported gasoline stockpiles had dipped from recent levels, but remain near all-time highs.

Crude oil prices, which heavily influence gasoline, have been rising all year, in part due to turmoil in the Middle East and the fear that, if events get out of control, it could interrupt the supply of oil to the industrialized nations.